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If the banking system has demand deposits of $100,000, total reserves equal to $20,000, and a required reserve ratio of 20 pe

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Answer #1

Answer : The answer is option C.

Loan providing capacity of bank = Deposit amount - Required reserve amount

=> Loan providing capacity of bank = 100,000 - 20,000 = $80,000.

Therefore, the bank can increase the loan volume by $80,000. So, option C is correct.

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